A warning to people accessing $10,000 of their super this Christmas

With just 10 days left for Australians to withdraw $10,000 in the Early Release Super Scheme, some families will be reassessing whether they need to access this cash over Christmas.

Consumer advocate RateCity.com.au is encouraging people to consider alternatives before taking money out of their super, or if they access it, to come up with a plan to put the money back when they can.

COVID-19 Early Release Scheme figures released today from APRA show that since April:

• $35.8 billion of super has been withdrawn under the scheme.
• $7,645 is the average payment (across both rounds).
• 3.4 million people have accessed their super.
• 1.4 million of these people made repeat applications.

Some Australians facing financial hardship due to COVID may now be considering making a last-minute application before the 11:59pm AEDT New Year’s Eve deadline.

RateCity.com.au research director Sally Tindall said: “Christmas is an expensive time of year but it’s worth resisting the urge to use super to buy expensive presents.

“However, Christmas isn’t the only thing squeezing people’s finances right now,” she said.

“The new wave of COVID restrictions and border closures could force people to resort to their super. Some businesses hoping for a bump at Christmas might now be closing their doors instead.

“There may even be some people who have managed to survive this year without dipping into their super who are now considering it.

“If this is you, carefully look at your other options before you resort to your super. Talking to a financial counsellor might help you think of alternatives to get through.

“The reality is, some people will have no alternative but to tap into their super. If you do, try to put the money back when you’re on your feet again to minimise the long-term fallout,” she said.

Long term impact of withdrawing super

Money taken out of a super account today can have long term implications on people’s retirement savings. According to ASIC, a 30-year-old who takes out $10,000 now will have an estimated $21,516 less in retirement. If the person takes out $20,000 over both rounds, they could stand to have $43,032 less in retirement, if the money is not replenished.

Long term impact of withdrawing super

Money taken out of a super account today can have long term implications on people’s retirement savings. According to ASIC, a 30-year-old who takes out $10,000 now will have an estimated $21,516 less in retirement. If the person takes out $20,000 over both rounds, they could stand to have $43,032 less in retirement, if the money is not replenished.

Source: ASIC Moneysmart calculator, assumes income of $50k and retirement at 67. See full assumptions at the end.

Who is eligible to withdraw super? Key criteria:

The early release of super funds must assist you with the adverse economic effects of COVID-19. In addition, one of the following must apply:

• You are unemployed, on JobKeeper or similar benefit.
• OR on or after 1 January 2020 either:
• You were made redundant.
• Your working hours were reduced by 20% or more (including to zero).
• Your small business has experienced a reduction in turnover of 20% or more.

If you do access your superannuation before Dec 31:

• Before you do anything, call an independent financial advisor. Ask yourself, is there another way?
• Make sure you meet the eligibility criteria. There are fines of up to $12,600 for misleading claims.
• Come up with a plan to put the money back into your super as soon as you possibly can through extra contributions.
• Use the money wisely and take as little as possible. This is your nest egg. Don’t blow it all on Christmas presents.

SUPERANNUATION NOTES: The estimates provided use the assumptions from the Superannuation Calculator. Assumptions include an income of $50,000, inflation of 4.0% p.a. (2.5% p.a. due to the rising cost of living [CPI inflation] and a further 1.5% p.a. for the cost of rising community living standards), investment return before tax and fees of 7.5% p.a and fees of 0.85% p.a. Assumed tax on earnings is 7.0%. Estimates are in today’s dollars.

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